Why e-tailing in India has to stay and stay live & real?

Indian e-tailing industry has undergone a sea change over the past two years. We have witnessed the appetite of Indians buyers online along with unprecedented interest of investors for this medium. However, recent events – ‘Letsbuy’ acquisition by Flipkart and ‘exclusively.in’ up for sale have been frowned and lambasted by thought leaders of the industry. In our view the so called “marriage of inconvenience” (as it has been referred to by some thought leaders) of Flipkart with Letsbuy is an attempt by investors to support, thrive and push the industry. Amidst all vulnerability hovering over Indian e-commerce industry, we believe e-commerce in India is here to stay and grow over the years. Our belief is not based on bubbles but on strong long-term vision that is shared by VCs and thought leaders. Iamwire interacted with industry leaders, VCs, entrepreneurs and economists to figure out – why ecommerce in India has to stay and stay real?

Consumer Demand: Indian online retail industry has grown from Rs. 1000 Crore to Rs. 2000 Crore to Rs.5000 Crore and is slated to touch Rs. 7,000 Crore milestone by mid 2012. Retailers who have set up online businesses say that business has grown by leaps and bounds over the past two years, and continues to rise. In 2011 we had outlined one strong accelerator for ecommerce in India – exceeded targets & earnings. E-tailers like Flipkart and Myntra had achieved their projected target for 2011 far before Christmas concluded. Interestingly, growth in sales is not VC driven.These are real consumers spending real money buying real products that has led to e-tailers meeting their revenue projections earlier than they expected. However, VC’s are playing their role in supporting this unanticipated rise in demand.

Experience at IRE 2012: Our experiences at the recently concluded Internet Retail Expo 2012 also repose our faith in the future of the industry. Over the past 3 years, the event has grown from 80 delegates in 2010 to over 200 in 2011 and over 350 in 2012 with avg. age of 35 Yrs and most of them from core retail organizations exploring options to venture into online retail. The delegateshad a clear focus on sustainable growth and were looking for ways to build a profitable online business as opposed to just looking for investments or funding.The shift of retail from offline to online is real and will not end with a few companies shutting down due to operational flaws, fickleness or inefficiencies. With time, online retail will offer promising returns with lower costs and we shall see some retailers/aggregators consolidate and survive with profits.

Positive Growth Curve: The volume of sales have gone up phenomenally across various categories of goods over the past one year. At the same time, we have also seen the growing interest of senior and seasoned professionals such as Sandeep Aggarwal who has taken the plunge in the Indian e-commerce (excluding Online Travel) landscape after a long and successful consulting stint with top global internet companies. In India, the market for e-commerce is set to grow over the coming years before it reaches a maturity stage which will witness market consolidation and bigger buyouts or exits. Even if the valuations may be unreal, in our view, the numbers – customers and revenues – are real and this is set to rise in the light of evolving socio-economic conditions including increasing disposable incomes across the country. According to a recent report from Technopak, the total size of business of selling retail goods on the internet, commonly known as e- tailing, is set to touch USD 70 billion by 2020 in India.

Flipkart – Letsbuy Story: The Company’s recent acquisition of Letsbuy has been in the news recently as many feel the acquisition is overpriced, unwise and played by common investors in both company. While we would not comment on the circumstances of the acquisition, we would go on to make the following points about Flipkart and the success it has had.After so many years, we finally have a company that focuses on making customers happy through its user and operational experiences. During an exclusive interview with iamwire last year, Sachin Bansal said that Flipkart has a 2.7 million consumer base and it is trying to attain revenues of Rs. 2,000 crore this fiscal.

The Flipkart – Letsbuy acquisition, according to some, may not be aligned with current market realities. However, it provides credence to the state of things to come, and are thus in support of the potential of the e-commerce industry in India.While the pundits may differ on valuations, it cannot be ruled out that Flipkart and Letsbuy both have scores of satisfied customers who benefited from their reliable and timely delivery of products as well as a customer centric approach to the business.

Iamwire Take

Indian online retail industry is still in a nascent stage and is yet to streamline the systems and processes driving the industry. It may face shutdowns such as Taggle and VogueMagnet. That does not, in any way, reflect negatively on the online retail business model in general. For every company which shuts down or is seeking a buyer for a distress sale, there are many others who are flourishing and going good with an eye on sustainability. What Indian e-commerce industry needs today is a coordinated effort to meet consumer expectations and facilitate the first steps the companies are taking towards online retailing.

Every industry in its nascent stage requires people who invest and play the role of key enablers. For Indian e-commerce VCs have played this role with gusto and are taking upon themselves the burden of high risk despite all the clamor about valuations and insecurity, ever convinced about the GOLDEN FUTURE of the e-commerce space in India and for that iamwire thanks VC’s for supporting Indian ecommerce story.